InterContinental Hotels Group (IHG) has announced a new operating region that combines Europe, Middle East, Asia & Africa (EMEAA) to be based in the UK, effectively relegating the current regional office in Singapore which covers AMEA (Asia, Middle East and Africa) to a sub-regional division.

A second shock is the resignation of Jan Smits, the current AMEA CEO who is widely respected by Asian owners and hospitality professionals as running a tight ship and sealing long-lasting, trustworthy relationships.

The restructure is the first major move made by IHG’s new group CEO, Keith Barr, who rose to the top on July 1 after making a mark as IHG’s CEO of Greater China, then as its chief commercial officer. The new CEO Barr picked to run EMEAA, Kenneth Macpherson, is currently IHG’s CEO of Greater China. Replacing Macpherson as CEO of Greater China, which remains as a regional office, is Jolyon Bulley, currently COO of Americas and was COO of Greater China.

The changes will take effect at the start of 2018. Smits will remain with IHG until the end of this year.

Some in the industry are pondering the logic of IHG moving farther away instead of staying close to the fastest-growing hotel market, Asia-Pacific. An EMEAA region is also atypical for the industry, raising eyebrows if such a “mega” region and one so diverse is do-able.

Just running Middle East and Asia is a challenge, pointed out Robert Williams, partner and head of hotels & hospitality Asia-Pacific, Withers Worldwide, based in Singapore. “So this is bold. And, trying to manage Asia from Europe – not many have succeeded there. Strong senior and empowered management on the ground in Asia and a clear mandate for them to execute strategy will be key.”

Asked how he thinks this will affect the current regional office in Singapore, Williams said: “Asia-Pacific is a key growth engine for the industry. That often gets overlooked by management teams in Europe and the US, who point to its smaller current size. Those sitting in Singapore may feel disenfranchised initially, and will miss Jan’s great leadership. But Kenneth has long been identified as a superstar and will no doubt represent Asia strongly in Denham.”

Asian owners and owner-representatives that let IHG manage their hotels are concerned. Said a shocked Choe Peng Sum, CEO, Frasers Hospitality Group: “First of all, the two major regions are so diverse, and to lump all operations under the UK? Just spells a little to owners like us that Asia is not that important anymore! I am indeed concerned whether we will get the attention for our properties in Asia out of Europe. There are so many opportunities both in Europe as well as Asia, two major distinct regions – it doesn’t quite figure to me.

“Secondly I am shocked and sad to see Jan leave the group as I have seen how he has led AMEA with passion and dedication, and the tremendous growth the group has seen under his watch. The attention to detail and the approachability whenever we need help or attention is always there. I hope things are not going to change with this major reshuffle. If so, we will certainly make our own plans for a reshuffle as well.”

On the flip side, Withers’ Williams thinks the move may give Barr more direct visibility into and control of Asia. “Arguably, it improves Asia’s representation in the head office too. Hopefully this feeds into the overall imperative for IHG, which must be to become the global operator that makes a difference quickly and much more aggressively.

“IHG has a track record of putting through a very deliberate reshuffle every four years or so. With a new group CEO at the helm, this is an early move to shape the management team and regions in a way that aligns with the vision the board is asking Keith Barr to deliver on,” said Williams.

He agrees with the sentiments being expressed on Smits’ sterling leadership. “Jan has built a great management team in Singapore and steered the region to record growth during a period in which two IHG legends Anthony South and Paul Logan (IHG’s development chiefs in AMEA) retired, and in which IHG has not been as aggressive with capital as some of its competitors. That is a legacy he can be very proud of.”

In a statement, IHG assured that the UK-based EMEAA region will operate through “strong” sub-regional divisions based in a number of locations, including Singapore, “to ensure the business remains close to hotel owners, guests and colleagues”.

“By bringing two strong, established regions together as one, the company will focus on further growth through increased agility and effectiveness,” it said.

Barr said in the statement: “The success of our current AMEA and Europe regions has put us in great shape. Our clear and focused strategy that remains unchanged, along with the investments we have made, has seen our business grow significantly in these markets. We are now ready to take the next step, which will continue to drive operational performance and accelerate the growth of our brands.

“The EMEAA region will be hugely diverse with tremendous opportunity. With Kenneth’s experience in our fastest-growing region, sharp focus on operational excellence and strong background in consumer brands, he has both the experience and passion to take our new region forward.”

InterContinental Hotels Group (IHG) CEO Keith Barr said he is not de-prioritising AMEA with his move to create a new mega region that combines AMEA with Europe based in the UK.

In fact, he wants to bring resources closer to the markets, Barr said in a phone interview from London.

The intention, according to Barr, is not to have a big office in Europe running the business but “to have more resources going into the markets close to the hotels and owners (and) to enable the markets have more autonomy and be a bit more entrepreneurial to drive performance. So we’re moving resources around while maintaining centres of excellence on development, luxury, F&B, operations, in Asia.”

Barr recounted that was how he ran Australia/New Zealand/South Pacific years ago. “I was a fairly independent business; I wasn’t dependent on Singapore. I had development, sales & marketing, revenue management, I ran my own business, and I had the ability to make decisions on how we partner, how we negotiate a deal, and that’s what I want to see. I want to empower southern Asia, India, and so forth. Sure there are some things we can’t do from a back office perspective such as finance or HR which are more process-related.”

He’s looking at how best to structure EMEAA on a market basis, he said. Macpherson will have accountability for the overall strategy of EMEAA, and there will be leadership in each of the markets who will be accountable for operating the hotels, opening hotels, growing the business. “We’ll work through who should be in those roles going forward. We have a number of people in place and we have to look at which other leaders we want to have in place going forward,” he explained.

He reiterated: “There’re going to be resources in Singapore, it’s a huge important part of the world for us. There will be resources in other important markets for us and we’ll be more focused on putting resources in markets that have the highest potential, based on pipeline, relationships with have with owners and our competitive positions too.”

Asked why this model is relevant for IHG today, Barr said: “The business has got scale now. Where we didn’t have scale in many of those markets in the years past, it did make sense to do everything out of Singapore. But now that we have scale in those markets, the best way to drive performance for owners is to grow more resources in those markets.”

Each market, he reminds, is fundamentally different. Australia/New Zealand has lots of institutional funds compared with southern Asia, which has lots of high net worth individuals, managed luxury and upscale business, he points out. “So no one size fits all,” he said. “I want to make sure we’ve got the right go-to-market strategy.”

Regions are just constructs that companies make, says Barr. What’s important is “how to ensure we have the right operating model in the markets and not be constrained (by traditional ways), how we look at using technology, new ways of working and leveraging our scale”.